Visitors to Hong Kong will soon be able to bag a single 'room' for as little as HK$240 per night - but it will be no place for the claustrophobic.

The city's first capsule hotel will be aimed at budget travellers and cash-strapped students, offering accommodation at a fraction of Hong Kong's average nightly rate.

Eric Wong Wai-lun, boss of Galaxy Stars, spent a year modifying the standard capsule bed design so it would suit the market in the city.

His company will supply the beds to hoteliers and he expects the first hotel to be ready within six months, subject to government approval.

Capsule hotels first appeared in Japan more than 30 years ago and the country now has more than 300, with up to 700 capsules in each.

While some liken the capsules to the cage homes inhabited by Hong Kong's poorest people, Wong says his stays at the hotels are always fun.

'It's like you're an astronaut going up in a spaceship. When you're travelling, you are out all day and only need a place to sleep at night.' Each capsule is made of plastic with steel reinforcements and is about the size of a single bed, measuring 1.9 metres long, 1.15 metres high and one metre wide. They come with a two-inch foam mattress and for fire safety reasons the capsules have no doors. They just have a simple screen that can be pulled down for privacy.

Each capsule, weighing about 100kg, is fitted with air-conditioning, a smoke alarm, power outlets, light switches, a TV and small shelves.

For every six beds, there will be a shared toilet and shower and the hotel will provide a communal area and lockers for luggage. Compared to capsule hotels across the Asia-Pacific region and Europe, Wong says prices in Hong Kong will be among the cheapest.

He set up his business a month ago and says he has been approached by the owner of a three-star hotel who is negotiating to find a site in Yau Ma Tei, Mong Kok or Tsim Sha Tsui.

'Over the past few years, the supply of hotel rooms has been very tight so I think there's a big market for cheaper hotels,' Wong said.

'There will be lots of tourists from the mainland when the [Guangzhou-Shenzhen-Hong Kong] high-speed rail is completed [in 2015].'

The average price of a hotel room in the city last year was HK$1,343, according to the Federation of Hong Kong Hotel Owners, and room rates are expected to rise between six and 10 per cent this year.

Wong has also spoken to several university student associations and if at least 15 students sign up to the idea, he will fit out a flat and rent them the capsules for HK$1,000 per month.

Cheryl Yan, a student at the University of Hong Kong, pays about the same price to share a small room with another student. She said she would consider a capsule bed only if facilities such as the kitchen and storage area were better.

$50

The price, in US dollars, of a capsule in one of Tokyo's hotels. When the recession hit Japan in 2010, a third of guests were unemployed